We first place venture capital more formally within a broader institutional framework and use an evolutionary approach (e.g., Murmann, 2003; North, 1990; Whitley, 1992) to trace its emergence and key contextual features that had an impact on its character. We can then understand the current status of investment in early-stage technology ventures, and will highlight the impact of the financial and industrial environment in general and the nature of angel investing in particular. This leads to a discussion of key factors that inhibit the function and performance of Hong Kong’s VC system and our proposals for addressing these. In brief, they include policy recommendations to increase the funds available for smaller but higher-risk investments (i.e., to cover the “equity gap” of new ventures); professionalize and diversify the skills of VC and private equity professionals; professionalize and formalize angel investors and associations; and provide more direct support for nurturing new ventures